More Gambling Options To Squeeze Connecticut’s Casinos
By BRIAN DOWLING, bdowling@courant.com The Hartford Courant
10:53 a.m. EDT, August 15, 2012
Connecticut had a sure thing when its casinos opened in the 90s with the nearest competition hours away, but with nearby states positioning themselves to compete, the local venues and the state treasury should brace for continued losses.
“There’s always a Newtonian reaction when one state legalizes gambling. The neighboring state comes up with an opposite but not equal reaction,” said Joe Weinert, vice president of Spectrum Gaming Group, a New Jersey-based gaming research firm.
“If you look at what’s happening in markets around the country, states are scrambling to either legalize or expand gaming, and as states do that, many established markets [like Connecticut] feel the impact from expansion.”
In the northeast that “scrambling” includes Massachusetts voting last year to allow casinos and Rhode Island recently clearing the way for a November vote on whether to expand its gaming. It might take a few years but the impact will be felt on the gaming floors at the Mohegan Sun and Foxwoods casinos in southeastern Connecticut and also by the taxpayers since the state gets a quarter for every dollar the casinos make on slot machines.
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The impact could be big — a loss of about $137 million annually, according to one study that suggests a 36 percent decline in what the casinos give Connecticut each year in as few as four years. The state’s annual take of slot revenue, a total of $325.8 million in 2011, might not seem like much given that the state’s annual budget is about $20 billion, but a decline of a third of that revenue is the first line of a bigger story.
The hard reality is that casino patrons will rarely drive by one casino to go to another and both Connecticut casinos are heavily dependent on out-of-staters.
About 65 percent of Foxwoods customers are from out of state and about 46 percent of Mohegan Sun’s, according to a gaming study by the University of Massachusetts Dartmouth’s Center for Policy Analysis.
“I would not be surprised that when Massachusetts gets going, Foxwoods will have to close a gaming floor,” said Clyde Barrow, the study’s author and chair of the university’s public policy department. He said that a worst case scenario for Connecticut casinos could involve a 45-percent revenue drop.
That study assumes that Massachusetts gets its venues operational in the next few years. The state plans to license three resort-style casinos and one slots parlor, one near Boston, another in southeastern Massachusetts and one in the west near Springfield. Each casino is expected to involve an at least $500-million investment and will create an estimated 2,000 jobs.
About a half dozen developers have expressed interest in the western Massachusetts license, which will most directly compete with Connecticut’s casinos. Interested developers include Ameristar, Hard Rock, MGM, Penn Gambling, Peter Picknelly of the Peter Pan Bus Company and Connecticut’s Mohegan Sun, which has already leased land in Palmer, Mass.
Connecticut “had this fortunate advantage of being the monopoly supplier to New England,” said Sebastian Sinclair, president of Christiansen Capital Advisors, a firm that studied how added casino gaming in Massachusetts would soon effect Rhode Island slots parlors. “Massachusetts said: ‘No more. We’re going to keep this money in state’.”
Connecticut casinos bring in about $2.4 billion a year, with about half from out-of-state visitors. Of that billion or so from out-of-state gamblers, about $624 million comes annually from Massachusetts and about $200 million from Rhode Island, according to the UMass report.
Rhode Island is poised to make a similar decision following a study on the projected impact of Massachusetts gambling on its revenues that found a savings of 4 to 11 percent of projected gambling revenues by 2017 if the state expands gambling. The question on the ballot is whether to allow gaming tables for poker, blackjack and the like in the existing slots parlors. If that measure is approved as well, the impact in Connecticut could be more serious.
Not that either Foxwoods or Mohegan Sun are unfamiliar with the trials of economic shifts, low gaming turnouts and unwieldy debt levels.
Foxwoods had more than 8,200 slot machines in December 2008. The casino has pulled 2,000 slots from the floor, according to filings with the state. Similarly, Mohegan has lowered its slot count by more than 800 since February 2009.
Mohegan Sun is better positioned to handle the increased competition from Massachusetts and Rhode Island, Barrow said, as more of their customer base is from Connecticut. “On the other side, they’re getting hit harder by New York” with the opening of slots and other games at the Yonkers horse track in Westchester County, N.Y. and the Aqueduct track in Queens.”
When Mohegan recently reported its quarterly earnings, it specifically noted pressure from increased competition at Resorts World Casino at the Aqueduct Raceway, which added slots last October.
Though it will take years before new casinos in Massachusetts and Rhode Island are operational and their effects are fully felt here in Connecticut, casino executives know that now is the time to prepare.
In response to the competition, Foxwoods and Mohegan are continuing to strategize, to set themselves apart from the soon-to-be crowded gambling scene. Both venues, controlled and operated on separate reservations, are turning to industry veterans, most notably from Las Vegas. Recently, Foxwoods hired a new advertising executive and Mohegan hired a new marketing executive, both from Las Vegas.
Not surprisingly, each Connecticut venue plans to follow the strategy that worked for Las Vegas by marketing itself as a total entertainment experience rather than just a gaming destination.
Mitchell Grossinger Etess, chief executive of Mohegan Tribal Gaming Authority, said that the casino will continue to diversify its non-gaming businesses like restaurants and arena events.
“Clearly gaming in Massachusetts is going to have an impact in Connecticut casinos and Twin River,” Etess said in an interview. “As to what that will be, it is difficult to quantify until we know the when, where and who.”
Robert O’Keefe, Foxwood’s head of brand and advertising who was hired in June, says Las Vegas worked hard to re-invent itself when smaller gaming operations cropped up in surrounding states. Las Vegas casinos were successful, many say, because their resort-style offerings gave people a good enough reason to drive by more convenient gambling options. Foxwoods will do the same, he said.
“We have an amazing resort and a variety of different amenities that I think are unrivaled even with the competition in New York and what’s being proposed for Massachusetts down the road,” O’Keefe said. “We have that bigger getaway experience.
“A part of our plan is to amp up how we demonstrate those other experiences,” O’Keefe said, mentioning plans for an outlet mall to be developed on site and efforts to increase use of the casino’s conference center.
In early August, Foxwoods and its creditors announced a deal to refinance the casino’s $2.2 billion in debt, giving the Mashantucket Pequot Tribal Nation some breathing room in dealing with their debt load.
Mohegan Tribal Gaming Authority, which operates Mohegan Sun, is corporately aiming to spread its reach in the northeast. Last week, the casino’s management operation announced that it will operate Atlantic City’s oldest casino, Resorts Casino Hotel. Also, in Massachusetts, the tribe is applying for the western Massachusetts casino license, with plans to build a $600 million resort casino in Palmer.
Copyright © 2012, The Hartford Courant
